What determines the proportion of a unit excise tax that will be passed on to consumers in the form of higher prices?

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Quizplus · Accepted Answer

The proportion of a unit excise tax that will be passed on to consumers in the form of higher prices depends on the price elasticity of demand and supply for the good being taxed. If the demand for the good is relatively inelastic, then the tax will mainly be borne by consumers. If the supply of the good is relatively inelastic, then the tax will be borne by producers. The degree to which quantity demanded and supplied respond to price changes determines how the tax burden is shared between producers and consumers. The other options listed are not factors that affect the proportion of the tax passed on to consumers in the form of higher prices.

What Determines the Proportion of a Unit Excise Tax That